Sunday, August 31, 2008

Philip Fisher Articles: Investing in Growth

Here is another version of Philip Fisher Articles: Finding Growth Stock

And like the earlier posting, I cannot recall the source of this article. Sigh!

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Investing Styles Thru History
Philip Fisher: Investing in Growth

Philip Fisher was a pioneer of growth investing. But more unique among growth investors, Fisher looked for growth companies only when they were selling at reasonable valuations. Even high earnings growth stocks fall out of favor, become overlooked and sell for less than their underlying worth from time to time. He was looking for low price relative to long-term prospects. Fisher's genius was to identify the fundamental factors behind a company's strength that led to above average earnings growth with the discipline to invest only in those showing extraordinary value.

Fisher learned about investing from Professor Boris Emmett at Stanford University's Graduate School of Business in the late 1920s. As a first-year student in 1927, Fisher was assigned to drive the Professor to the San Francisco Bay area once per week to visit real businesses. This assignment offered tremendous insights for Fisher, both from learning about real businesses, and from listening to Professor Emmett's insights during the weekly trips.

Fisher developed an ability to identify well-managed companies with a potential to grow beyond their current size, a concept of "growth investing" not yet formalized in the late 1920s. He also learned to focus on the importance of the sales and marketing role in these businesses. Previous investment focus had dwelled on inventions and manufacturing efficiency, but Fisher saw the need for good sales & marketing people to convince others of the value of their product and control its own growth destiny.

Fisher's first job was as a securities analyst with an independent San Francisco bank. He disliked selling securities to customers based on superficial analysis to increase bank commissions, and asked for a new assignment. Fisher was finally allowed to do some hands-on analysis of US radio stocks. He visited the radio departments of several retail outlets and sought opinions on the three major competitors in the industry. He was surprised by the high degree of consensus.

The radio maker favored by the stock market was viewed as the worst company in the eyes of radio company's customers (the retail store owners). Another popular company, RCA was just about holding its own. Philco, however was the clear winner. It had superior models, was winning market share and was highly efficient. He searched for a negative comment from a Wall Street analyst on the first company, the worst performer in retailers' eyes, but was unable to find any. It was his first lesson in what became his evolving investment philosophy: reading the printed financial records about a company is never enough to justify an investment. One of the major steps in prudent investment must be to find out about a company's affairs from those who have some direct familiarity with them.

Learn From Mistakes

In August 1929, Fisher wrote a report that predicted within the next 6 months a great bear market would start, the greatest in a quarter-century. He actually underestimated their fierceness of the Great Crash and following Great American Depression of the early 1930s. Unfortunately, Fisher failed to take his own advice. He was entrapped by the lure of the market with rising prices. He invested his life's savings of a few thousand dollars into stocks bought on the basis they were cheap versus other more overpriced stocks. In choosing investments, he did not bother making inquiries from people who either knew their products or employees. By 1932, he lost almost all his money.

Fisher was determined to learn from his experience: "The chief difference between a fool and a wise man is that the wise man learns from his mistakes, while the fool never does." One lesson was that a low price to historical earnings ratio was no guarantor of value. What the investor needs is a stock with a low price relative to earnings in a few years ahead. He started to think of ways to predict accurately (within fairly broad limits) the earnings of firms a few years from now.

Fisher began to search for companies with these qualities:

  • 1. The people are outstanding;
  • 2. A strong competitive position;
  • 3. Operations and long-term planning were handled well;
  • 4. Enough high-potential new products to continue growth for many years.

From Fisher's description of why he invested in Dow Chemical Company helps us understand his methodology more thoroughly:

As I began to know various people in the Dow organization, I found that the growth that had already occurred was in turn creating a very real sense of excitement at many levels of management. One of my favorite questions in talking to any top business executive for the first time is what he considers to be the most important long-range problem facing his company. When I asked this of the president of Dow, I was tremendously impressed with his answer: 'It is to resist the strong pressures to become a more military-like organization as we grow very much larger, and to maintain the informal relationship whereby people at quite different levels and in various departments continue to communicate with each other in a completely unstructured way and, at the same time, not create administrative chaos. I found myself in complete agreement with certain other basic company policies. Dow limited its involvement to those chemical product lines where it either was or had a reasonable chance of becoming the most efficient producer in the field as the result of greater volume, better chemical engineering and deeper understanding of the product or for some other reason. Dow was deeply aware of the need for creative research not just to be in front, but also to stay in front. There was also a strong appreciation of the 'people factor' at Dow. There was in particular a sense of need to identify people of unusual ability early, to indoctrinate them into policies and procedures unique to Dow, and to make real efforts to see if seemingly bright people were not doing well at one job, they be given a reasonable chance to try something else that might be more suitable to their characteristics.

A Technology Focus

Fisher held relatively few companies in his portfolio at any one time, and was not afraid to concentrate his wealth on a few obscure businesses. In 1955, for example, he bought two stocks that were generally regarded as highly speculative. They were small companies and were technologically oriented; they were beneath the notice of conservative investors or big institutions. "A number of people criticized me for risking funds in a small speculative company which they felt was bound to suffer from the competition of the corporate giants." Both stocks eventually turned in spectacular returns. Their names? Texas Instruments and Motorola.

Fisher's view of the stock market was very rational. In reflecting on a lifetime of investing in 1980, Fisher noted that, with the exception of the 1960s, there has not been a decade in which the prevailing view was that common stock investment was foolhardy, because factors outside the control of corporate managers were too strong for them to control the destiny of their corporations. However, in every decade there were wonderful opportunities to buy stocks yielding returns of hundreds of percent. On the downside, in each of these decades there were also periods in which the 'speculative darlings' of the time became disastrous traps for the unwary, 'for those who blindly follow the crowd rather than who really knew what they were doing'. The next ten years will also present magnificent opportunities for those who know what to look for. They will also be littered with the same old traps for those unaware of the vital principles for good investing. Those who look for an intellectually cheap and easy way to fortune will find their path strewn with dangerous temptations.

Fisher chose to devote himself to the study of technology based companies. However, followers of Fisher do not have to confine themselves to this area-- as Warren Buffett so adeptly demonstrated with a Fisher-like quality focus outside technology industries, which he lacked the confidence for depth of understanding. Fisher intended to hold his investments for many years, if not decades. A great company, with highly motivated and able managers can continue to grow way beyond the investment horizon of conventional investors.

Selection Of Stocks

The most important elements of Fisher's analysis were:


  • 1. Research and Development

  • 2. Quality of People

  • 3. The firm's competitive position

  • 4. Marketing

  • 5. Financial state and control

  • 6. Scuttlebut

  • 7. Price paid

Scuttlebut is a factor which surrounds all the others. It is through scuttlebut that Fisher discovered the vital facts about a firm, from the character of its managers to the effectiveness of its research. Scuttlebut is the use of the business grapevine to research companies. It is scavenging for information by obtaining the views and opinions of anybody associated with a company: customers, employees, x-employees, rivals, suppliers, academics, trade association officers, industry observers, etc.

The business 'grapevine' is a remarkable thing. It is amazing what an accurate picture of the relative points of strength and weakness of each company in an industry can be obtained from a representative cross-section of the opinions of those who in one way or another are concerned with any particular company. Most people, particularly if they feel sure there is no danger of being quoted, like to talk about the field they are engaged and will talk rather freely about their competitors. Go to five companies in an industry, ask each of them intelligent questions about the points of strengths and weaknesses of the other four, and nine times out of ten a surprisingly detailed and accurate picture of all five will emerge.

Suppliers and customers can provide an opinion that is as well informed and illuminating as that of competitors. They also provide a means of cross checking. The character of the people managing the firms should emerge. The impression formed can be reinforced by talking to former employees. However, when seeking opinions here, great care is needed to ensure allowance is made for the fact that views from this source may be tainted by feelings of resentment. It is very important that the person providing the information is reassured that their identity will never be revealed. The analyst must scrupulously observe this policy. Trade association personnel, especially, will need this reassurance, as will current employees. If there is the slightest doubt as to analyst's ability to observe the rules of confidentiality he or she will simply not get to hear unfavorable opinions.

In the case of really outstanding companies, the preponderant information is so crystal-clear that even a moderately experienced investor who knows what he is seeking will be able to tell which companies are likely to be of enough interest to him to warrant taking the next step in his investigation. This next step is to contact the officers of the company to try to fill out some of the gaps still existing in the investor's picture of the situation being studied.


Previous Philip Fisher articles

1.
Philip Fisher Articles: Finding Growth Stock


Saturday, August 30, 2008

Regarding Sino Hua-An

I had several postings on the stock called Huann on Seng's chatbox. I have decided to write a brief comment on it here.

I had actually wrote a bit on the stock on Sahamas forum,
http://sahamas.net/forum5/5799-1.html. See posting #2.

Huann reported its earnings the other day. Here is a compiled table I got from Star website.



From this set of tables what do you see? What do I see?

I see a relatively flat earnings with no growth.

On a quarter-to-quater comparison, earnings went from 37.442 mil (07 Q4) to 35,567 mil (08 Q1) to 36.916 mil (08 Q2).

That's how I see it. Do you see any difference?

And do note that 08 Q2 earnings, sales revenue shot up to 434.426 million. However, earnings only increased so slightly from 35.567 million to 36.916 million. Now one can take the calculator and compute the earnings margins but one should be able to spot that there is tremendous pressure on its earnings margins. Would this be a worry?

How?

Just from the earnings alone, how would you evaluate this stock?

The earnings are decent no? But there is NO Growth and now earnings margins is under massive pressure.

And would this be one reason why potential 'investors' or buyers would be worried about?

And what about the company's product? IMHO this is also a huge concern because the past couple of months, metallurgical coke and its by-products have had one MASSIVE bull run. Prices had been extremely favourable and logical reasoning would suggest that this favourable coke prices would have boosted Huann's bottom line. But as we can see above earnings table, this coke bull run did not translate to better earnings for Huann. Would this be a concern since we have here a company whose key product is having one hell of a bull run but yet the company produces flat earnings. What does this say about the Quality of the company and the Business? Not very good yes? Do you reckon such reasoning is flawed?

But ... but... but... the market has thrown Ze Screw ball for players to practise their forehand and backhand, underhand slices or smashes. :P

The deemed PE multiples now for Huann appears incredibly cheap and less me forget that Huann has a strong cash balance sheet - bank cash balances totals more than 75 million with no debts.

How? Do you want to buy this 'average' company that is now selling at a cheap price?

ps. The recent quarterly earnings is the 5th quarterly earnings reported from Huann since its listing. Perhaps it's much early days...

Huann last traded at 54 sen.

Here is the stock chart of Huann.


Do you think Huann stock price can go up?


Ah... in the stock market... anything CAN and WILL always happen.



A stock like Huann like all other stocks do stand a chance to go up for a nice small gain on Tuesday... but who knows for sure? I for sure do not know.. i never do. And if you think you can make some moolah here... go ahead man... it's your money, your decision... me? I am only stating my FLAWED views as always.


Cheers and Good Luck.

Philip Fisher Articles: Finding Growth Stock

Here is my collection of articles collected from the web. Some are without source, hence I cannot give due credit.


Philip Fisher: Finding Growth Stocks


  • I sought out Phil Fisher after reading his Common Stocks and Uncommon Profits and Other Writings. When I met him, I was as impressed by the man as by his ideas. A thorough understanding of the business, obtained by using Phil’s techniques... enables one to make intelligent investment commitments. --Warren Buffett

After Phil Fisher published the original 1958 edition of Common Stocks and Uncommon Profits, he received letters from readers all over the world---most asking for more detailed information about what an investor should do to find stocks with the potential to offer spectacular gains, that is, how to identify growth stocks. In later editions of the classic text, Fisher included a chapter (Chapter 10 in the latest 2003 edition published by John Wiley & Sons) on ’How I Go about Finding a Growth Stock’. This article is a summary of Fishers comments on this topic.

Fisher begins by stressing that finding growth stocks is a tedious process that must take time and energy, as well as skill and alertness. Small part-time investors may feel it is not worth the effort. While it would be nice if some shortcut could be found, Fisher doubts one ever will be. Fisher concludes, ’How much time should be spent on these matters is, of course, something each investor must decide for himself in relation to the sums he has available for investment, his interests, and his capabilities.’

Fisher further acknowledges that his method for searching for high-growth stocks is not the only possible method--and perhaps not even the best method--but it is the best method he has found and has worked well over many decades. Fisher organizes his growth stock search into two stages--the first stage being to narrow the field of possible stocks to investigate, and the second stage making a decision to buy or not to buy. Perhaps surprisingly, Fisher finds the first stage the most challenging.

Fisher states, ’This is the problem that confronts anyone about to start on a quest for a major growth security: there are literally thousands of stocks in dozens of industries that could conceivably qualify as worthy of the most intensively study. You cannot be sure about many of them until considerable work has been done. However, no one could possibly have the time to investigate more than a tiny percentage of the available field. How do you select the one or the very few stocks to the investigation of which you will devote such time as you have to spare?’

When Fisher began to assess his own personal investment screening process he was surprised to find out that his original ideas found by discussing businesses with scientists and management first-hand had only supplied about one-fifth of his eventual purchases in his portfolio. The lion’s share, about 80% of his stock purchases and an even greater share of portfolio profits over time had come from an entirely different source if stock ideas--recommendations from a small number of trusted sources.

Fisher says, ’I might not agree at all with the conclusions of any of these men as to a stock they particularly liked... however, because in each case I knew their financial minds were keen and their records impressive, I would be disposed to listen eagerly to details they might furnish concerning any company within my range of interests that they considered unusually attractive for major appreciation. Furthermore, since they were trained investment men, I could usually get rather quickly their opinion upon the key matters most important to me in my decision as to whether it might be a good gamble to investigate the company in question.’

What were Fisher’s key questions to his knowledgeable and trusted friends within his investing network? First, he wanted to know if the business, in general, had the potential for very high growth rates. Then he wanted to know how easily second and third industry entrants could compete with the first mover and take sales share or erode profit margins. Fisher found his network of investing friends a far richer source of good ideas than brokerage houses or newspaper journalists. One other useful source of original growth stock ideas would be business consultants, but the problem here is they are often reluctant to discuss details for fear of breaching client confidentiality.

Once Fisher has narrowed his search to a few candidates, what does he do next? He begins by explaining what he does not do. He does not approach anyone in the management at this stage. He does not spend hours and hours going over old annual reports and making minute studies of minor year-by-year changes in the balance sheet. He does not ask a stockbroker what they think of the stock. He does, however, glance over the balance sheet to determine the general nature of the capitalization and financial position. He also looks into breakdowns of sales by product lines, competition, degree of management or other major stockholders, and all earnings statement figures throwing light on depreciation, profit margins, research activities, and abnormal or non-recurring costs in prior years.

Now Fisher really goes to work. He uses the ’scuttlebutt’ method described throughout his book--interviewing scientists, engineers, suppliers, customers, competitors, and anyone else who might have important information about the business that is not common knowledge among public or institutional investors. At this point, if Fisher is hitting dead ends and struggling to get the information he needs--he will often give up and move on to investigate another business.

Fisher says, ’To make big money on investments it is unnecessary to get some answer to every investment that might be considered. What is necessary is to get the right answer a large proportion of the very small number of times actually purchases are made. For this reason, if way too little background is forthcoming and the prospects for a great deal more is bleak, I believe the intelligent thing to do is to put the matter aside and go on to something else.’

When Fisher uncovers interesting scuttlebutt on a business of interest--he usually needs to talk to one or two key people to gain additional information. He does NOT just walk up to them off the street and start asking questions. As he says, ’Most people, interested as they may be in the industry in which they are engaged, are not inclined to tell to total strangers what they really think about the strong and weak points of a customer, a competitor, or a supplier.’ Instead, Fisher goes to their commercial banker and explains openly how he is trying to gain information necessary to make an investment decision. Bankers are surprisingly helpful in making important introductions to open doors.

Only after all scuttlebutt has been accomplished are you ready to approach management of the company in interest. Fisher believes this is critical. Fisher states, ’Good managements, those most suitable for outstanding investment, are nearly all quite frank in answering questions about the company’s weak points as fully as about its strong points. However, no matter how punctilious a management may be in this respect, no corporate officer in his own self-interest can be expected, unasked, to volunteer some of the most significant matters to you, the investor, to know.’

In short, you need to do a tremendous amount of legwork prior to meeting management so you are in a position to ask probing questions about the business--strengths and weaknesses must be known prior to the meeting or you will still not know them after the meeting. Scuttlebutt is the essence of Fisher’s method. As he says, ’When it comes to selecting growth stocks, the rewards for proper action are so huge and the penalty for poor judgment is so great that it is hard to see why anyone would want to select a growth stock on the basis of superficial knowledge. If an investor or financial man wants to go about finding a growth stock properly, I believe one rule he should always follow is this: he should never visit the management of any company he is considering for investment until he has first gathered together at least 50% of all the knowledge he would need to make the investment.’

Fisher was once asked the ratio between companies visited and companies added to his portfolio. The banker asking the question guessed it was 250:1. Fisher answered, ’Actually it runs somewhere between one to every two and one to every two and one-half! This is not because one out of every two and one-half companies I look at measures up to what I believe are my rather rigorous standards for purchase. If he had substituted ’companies looked at’ for ’companies visited’ perhaps one in forty or fifty might be about right. If he had substituted ’companies considered as possibilities for investigation’ (whether I actually investigated them or not) then the original estimate of one stock bought for every two hundred and fifty considered would be rather close to the mark.’

Fisher added, ’What he had overlooked was that I believe it is impossible to get much benefit from a plant visit until a great deal of pertinent ’scuttlebutt’ work has been done first, and that I have found that ’scuttlebutt’ so many times furnishes an accurate forecast of how well a company will measure up to my fifteen points, that usually by the time I am ready to visit the management there will be at least a fair chance that I will want to buy into the company.’

Fisher finishes up by briefly addressing those who object to his method of spending such an amount of time and effort on each single investment decision. He says, ’I would ask those with this reaction to look at the world around them. In what other line of activity could you put $10,000 in one year and ten years later (with only occasional checking in the meantime to be sure management continues of high caliber) be able to have an asset worth from $40,000 to $150,000? This is the kind of reward gained from selecting growth stocks successfully. Is it either logical or reasonable that anyone could do this with an effort no harder than reading a few simply worded brokers’ free circulars in the comfort of an armchair one evening a week?’

Growth stocks cannot be found without hard work, and they cannot be found every day!



Friday, August 29, 2008

Malaysia Budget 2009 Highlights

29-08-2008: Budget 2009 highlights

1. Tax rebate for chargeable income group up to RM35,000 raised to RM400 from RM350 now while tax rate for RM35,000-RM50,000 reduced by 1pp to 12% and over RM250,000 by 1pp to 27%

2. Interest income received from moneys deposited in all banks fully exempted from 5% tax to increase disposable income.

3. Tax exemption for employees' allowances to include petrol (up to RM6,000pa), parking, meal, childcare (RM2,400pa), telephony and maternity.

4. Road tax on private saloon, non-saloon diesel vehicles to be the same as that of petrol vehicles

5. Home loan agreement of up to RM250,000 to be given 50% stamp duty exemption for Malaysians, limited to one purchase between Aug 30, 2008 and Dec 31, 2010.

6. Import duty and sales tax exemption on imported solar photovoltaic system equipment; sales tax exemption of local solar heating system equipment

7. Franchise holders of hybrid cars be given 100% exemption of import duty and 50% exemption of excise duty on new CBU hybrid cars below 2L.

8. Income tax exemption on fees received by corporate advisers for primary, dual or cross listings to attract foreign listings for 2009-2013.

9. Income tax exemption on fees from non-ringgit sukuk issued in Malaysia and distributed outside; also profits from trading of non-ringgit sukuk for 2009-2011.

10. REIT final withholding tax (wt) on foreign institutional investors to be reduced to 10% from 20%, wt on individuals reduced to 10% from 15% for Jan 1, 09 to Dec 31, 2011.

11. Excise duty on cigarettes to be raised by three sen per stick to 18 sen, duty for 20-stick pack raised by 60 sen.

12. Civil servants to get one-month bonus or at least RM1,000 for 2008, to be paid in two instalments

13. Import duty of between 5% and 25% on fertilisers and pesticides be abolished

14. Import duty of between 15% and 30% on electrical goods such as blenders, rice cookers, microwave owns and electric kettles be reduced to between 5% and 20%

15. Import duty of between 10% and 30% on petrochemical and polymer industrial goods such as rubber mats, tubes made of rubber and plastic bottles be reduced to between 5% and 20%

16. Import duty of 20% on port cranes be reduced to 5%

17. Import duty of between 25% and 60% on textiles such as carpets and glassware be reduced to between 20% and 30%

18. Import duty of between 5% and 20% on food products such as vermicelli, biscuits, mixed fruit juice and sweet corns in air tight containers be fully exempted.


Source: http://www.theedgedaily.com/cms/content.jsp?id=com.tms.cms.article.Article_dbca4eb0-cb73c03a-11151520-58ff0fa7

Reactions:

29-08-2008: Anwar says govt fails to address issue of competitiveness in Budget 2009

29-08-2008: BAT's post-Budget comments

29-08-2008: IBM Malaysia's post-Budget comments

29-08-2008: MBAM's post-Budget comments

29-08-2008: Microsoft Malaysia's post-Budget comments

29-08-2008: CIMB Group's post-Budget comments

29-08-2008: Maybank's post-Budget comments

29-08-2008: Philips Malaysia’s post-Budget comments

UK Housing Prices

Was reading The UK Sun and the following article caught my attention: House price fall fastest for 18yrs

  • HOUSE prices are falling at the fastest rate for 18 years, it was revealed yesterday.

    They tumbled another 1.9 per cent this month.

    And that took the annual rate of decline to 10.5 per cent — not seen since the 1990 property crash.

    The drop was revealed as a CBI survey showed high streets are suffering their worst sales slowdown for a quarter of a century.

    House prices have now fallen for ten months in a row.

    And Nationwide’s chief economist Fionnuala Earley warned a recovery was unlikely in the near future.

    She said builders had reported much lower interest in new houses.

Pintaras Jaya IV

Previously blogged on Pintaras Jaya: Pintaras Jaya , Pintaras Jaya II and Pintaras Jaya III

Pintaras reported its earnings last night. It was rather poor.

Net earnings only came in at 1.963 million. It's previous quarter in May 2008, Pintaras made 7.621 million (see
Pintaras Jaya III )

Yes this company cash balances is extremely healthy but earnings does matter. I could flawed but net earnings plunging to just 1.963 million per quarter is a massive concern for me.

So is their dabbling with market securities. I do not like it at all.


Here's my opinion on this issue again. Let paste what I had said before.

  • I have always disliked seeing our local companies dabbling in the stock market and one of the most disturbing issue is that there is ZERO transparency. The companies do not let their shareholder knows the details of their so-called investment. For example, we do NOT even know what share they buy, at what price was the investment made and most important, why.

Let's have a look at what Pintaras said in its earnings notes and see if my concerns and issues are justifiable or not.

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20. Marketable Securities


(a) Total purchases and disposals of marketable securities for the current financial year-to-date are as follows: -

Total Purchases 28.789 million
Total Disposals 29.099 million
Total Gain on Disposal 2.543 million

(b) Total investments in marketable securities as at 30 June 2008 are as follows:-

At cost 27,200
At carrying value/book value; and 24,709
At market value 25,921

Update On Uchi

Short posting:

Uchi Technologies reported its earnings last nite. It was disappointing. It's first half fiscal year net profit has decreased by some 18.21% compared to previous fiscal year first half earnings. Current first half earnings totals only 34.970 million compared to 42.754 million the previous year.

Some issues worth pondering. Has it's spectacular growth finally ended? Signs of margin pressure exist. Would the issue snowball? And last of not least, one should consider the durability of Uchi products now given the current economic environment.

Two previous blog posting that should be read, Review Of Uchi Again. and Uchi and its ESOS ( the ESOS issue is still a huge concern)

Oh the stock price has clearly plunged. Like Peter Lynch advices perhaps one is better off not to have a fixation on stock prices.

Stock may appear cheap based on current prices but perhaps now it's not a time to be a hero.

Company made the following comments:

  • Revenue in Ringgit Malaysia for the period ended June 30, 2008 (RM70.361 million which equivalent to USD21.850 million), decreased by 11% as compared to June 30, 2007 (RM79.128 million which equivalent to USD22.808 million), mainly due to:

    (a) Appreciation of Ringgit Malaysia against US Dollar (6 months ended June 30, 2008: RM3.22:USD1; 6 months ended June 30, 2007: RM3.47:USD1).

    (b) Deferment of sales order in consequence of customer’s logistic planning restructuring.

Thursday, August 28, 2008

More Lunatic And Cheap Talks From AirAsia?

Blogged recently, AirAsia: Lunatics And Cheap Talks?

Is the demand for cheap talk really so great?

It really makes me wonder.Let me show you an example again today.

Published on Associated Press
Malaysia: Budget Airline AirAsia Can Stay Profitable Even If Oil Hits $200 A Barrel, CEO Says

For some the headline is already plain cheap talk!

You see, as stated in the article itself..

  • Airlines have been struggling to contain costs this year as oil prices stay above US$130 a barrel. Scores of startup carriers have gone out of business and several major carriers have raised fuel surcharges, cut capacity and deferred plane orders or shed jobs.
Other airlines are struggling big time with oil prices staying above US130 per barrel.

And here, our local CEO, decides to boldly announce that his airlines can stay profitable even if oil hits US$200 per barrel.I wonder if the word humble ever exist?

Do read again what was posted in that blog posting first,
AirAsia: Lunatics And Cheap Talks?

Crude Oil has not gone past US150 per barrel and today, AirAsia reported its earnings.
Quarterly rpt on consolidated results for the financial period ended 30/6/2008

It wasn't pretty and in fact it was a shocker!

Losses before taxes were around 46.9 million and if not for that much questionable, debatable and controversial 'deferred taxes' grant ( see past posting
AirAsia's deferred taxes issue. and More on AirAsia's Deferred Tax Issue ) of 57 million, Air Asia would had been buried deeply in losses. And because of the tax grant, Air Asia managed a gain of 9.4 million.

And crude oil did not even go higher than US150 per barrel.

So much for cheap talks!

So crude now has gone down.

Got chance for Air Asia?

See page 12 of their earnings pdf file attached on their earnings report,
Quarterly rpt on consolidated results for the financial period ended 30/6/2008

Can you see how their forex gain of 86 million reported in their previous quarterly earnings report has now turned into a loss of 76/8 million!!!!

And lately the ringgit has gone down lower. So looks like the lower oil impact will be offset by the much weaker ringgit!

Is there no end to their problems?

Perhaps the company would learn the meaning of the word humble.

However, this is not to be.

Published on Dow Jones newswire:


  • KUALA LUMPUR (Dow Jones)--Malaysia's AirAsia Bhd. (5099.KU) Thursday said its net profit declined 95% on year in the April-June quarter with high fuel costs and foreign exchange losses hurting margins.

    Asia's biggest budget airline by fleet size posted a net profit of MYR9.4 million for the second quarter ended June 30, compared with MYR185.1 million a year earlier.

    The airline is changing its year-end to Dec. 31 from the previous June 30 - so the MYR185.1 million figure was for last year's fiscal fourth quarter.

    The second quarter net profit of MYR9.4 million is substantially below an average MYR50 million estimate taken from forecasts by three analysts polled by Dow Jones Newswires.

    The analysts had said that a lack of clarity over the size of a possible deferred tax component and fuel speculation made projection difficult
    .

    The company said second-quarter revenue was MYR608.4 million against MYR432.2 million a year earlier as passenger numbers rose 20% to 2.8 million and fares increased 16%.

    Load factor - the proportion of seats filled - decreased to 76.4% from 80.7% a year earlier as capacity surged 33% to 4.51 billion available seat kilometers, or ASK, following the introduction of two Airbus A320s to the fleet, AirAsia said.

    The carrier had 43 aircraft as of June 30, up from 34 a year earlier.

    AirAsia said also that unit costs excluding fuel improved by 19% on year because of productivity gains and more Airbus A320s inducted into the fleet. However, when fuel cost is included, the unit cost was 3.57 US cents per ASK, 10% higher than a year ago.

    In a statement, AirAsia Chief Executive Tony Fernandes said the second quarter results are "commendable, given that unit fuel price increased by 65% to US$142.5 per barrel."

    He said the Malaysian ringgit has weakened and this has resulted in a translation loss of MYR77 million.

Commendable????? How about the word POOR or TERRIBLE?

AirAsia said also that ancillary income - or income from insurance and checked baggage - surged 60% on year.

For the first half, net profit was MYR170.7 million, down 37% from MYR272.3 million a year earlier, despite revenue rising 38% on year to MYR1.14 billion.

AirAsia said its loss from 49%-owned associate Thai AirAsia was MYR21.7 million while loss from another 49%-owned associate, PT Indonesia AirAsia, was MYR12.2 million.

AirAsia isn't paying a dividend for the quarter.

The airline said the third quarter will be challenging on seasonal factors, compounded by the fact that jet fuel prices spiked to record levels in July.

"Despite the added challenge for the third quarter, we are confident that we will remain profitable for the full year accounted," AirAsia said, without giving a numerical forecast.

Fernandes said "there are some months we hedged up to 200,000 barrels (of fuel)" but on the whole the company is "largely unhedged as our view is that (crude) oil prices will fall further."

He also said the airline is on track to grow its capacity as measured by ASK, by 25% to 30% in the current year.

The airline, he said, will also commence its first flight to India in September, without giving a specific destination.

Hmmm.... in the previous posting AirAsia: Lunatics And Cheap Talks?

  • AIRASIA Bhd, Asia's biggest discount carrier by fleet size, will stop making bets on the price of oil, after incorrect forecasts contributed to a 16 per cent slide in shares over the last month.

    "It's a nightmare because the volatility is crazy," chief executive officer Datuk Tony Fernandes said in a Bloomberg Television interview on Thursday. "We took a bet that oil won't go above US$90 a barrel and it has and it's staying there."
How?

Peter Lynch Quotes And Stock Principles

"Thousands of experts study overbought indicators, oversold indicators,
head-and-shoulder patterns, put-call ratios, the Fed's policy on money supply, foreign investment, the movement of the constellations through the heavens, and the moss on oak trees, and they can't predict markets with any useful consistency, any more than the gizzard squeezers could tell the Roman emperors when the Huns would attack."
- Peter Lynch, One Up On Wall Street

"There are 60,000 economists in the U.S., many of them employed full-time trying to forecast recessions and interest rates, and if they could do it successfully twice in a row, they'd all be millionaires by now...as far as I know, most of them are still gainfully employed, which ought to tell us something." - Peter Lynch, One Up On Wall Street

"We must remember that capitalism almost by definition is a system of excess and self corrections"............. Said differently, our job is to help you be greedy when others are frightened, and cautious when others are greedy....... "Correction can be a scary experience...how should we react? Mostly by doing nothing." - Peter Lynch

~~~~~~~~~~~~~~~


Lynch's Stocking 20 Principles:

1. Invest in something you understand; become the expert.

2. Avoid the herd...venture where others fear.

3. Short-term there's little correlation between a company's earnings success and its stock price...long-term there's a 100% correlation; so, buy quality and be patient.

4. Know what you own and why you own it.

5. Long shots almost always miss the mark.

6. 5-10 companies are all the average investor can adequately follow.

7. It's OK-lah to hold cash when you don't find attractive stocks.

8. Never buy a stock unless you understand its balance sheet.

9. Avoid hot stocks in hot industries...look for great companies in boring industries.

10. Avoid small companies until they become profitable.

11. You only need a few great stocks to make a lifetime of investing worthwhile.

12. In your industry or your neighborhood you have the advantage over professionals.

13. Stock prices always fall sometime-giving the prepared investor a bargain.

14. Everyone has the brains to buy stocks, few have the stomach.

15. Ignore news of doom, focus on fundamentals.

16. Ignore interest rates, economy & stock market forecasts-focus on your companies.

17. Only 1 in 10 companies you study will uncover a story better than expected...thus, you'll need to sturdy 50 companies to find 5 investments.

18. Buying a stock without studying the company is just gambling.

19. Time is on your side when you own stock in a good company.

20. In the long run, a well-chosen portfolio of stocks will soundly ourperform fixed rate investments like bonds or moneymarkets

---------------------

Other articles

My Favourite Peter Lynch Articles
Peter Lynch Lyrics: Don't invest if you don't understand the story
Peter Lynch Lyrics: Earnings, Earnings, Earnings!
Peter Lynch Lyrics: Beware the Whisper Stock
Peter Lynch Lyrics: Foolish Acquisitions
Peter Lynch Lyrcis: Investing Art & Science
Peter Lynch Lyrics: Liking the product or service is only step #1
Peter Lynch Lyrics: Missing The Obvious
Peter Lynch Lyrics: Lynch on Warren Buffett
Peter Lynch Lyrics: Penultimate Preparedness
Peter Lynch Lyrics: Contrarian Investing
Peter Lynch Lyrics: Predicting The Market
Peter Lynch Lyrics: Looking in the mirror before calling the broker
Peter Lynch Lyrics: Investing In Houses And Stocks
Peter Lynch Lyrics: Risks and Rewards in Stock Market Investing
Peter Lynch Lyrics: Trying Not To Look Bad
Peter Lynch Lyrics: Theory vs Practice

Peter Lynch Lyrics: Investing Art & Science





ps: This is the last of my Peter Lynch articles collection. Hope you have enjoyed it.

Wednesday, August 27, 2008

To Continue To Err Is The Greatest Mistake!

Great post by Dr. Brett!

To err is human; to continue to err is the greatest mistake traders make.

Any individual trade can make money or lose money. If you're in a drawdown mode over time, however, at least one of the following problems is present:

1) You're Off Your Game - Not trading well, taking bad trades, failing to take good ones, not managing money and risk well.

2) You're Wrong - You're trading well (i.e., following rules and good trading practices), but you've just misread the market.

Either way, you need to recalibrate. First you need to answer the question, "Is it me, or is it the market?" Then you need to figure out how to get back on your game or you need to reassess the markets and find opportunity.

To recalibrate, it is necessary to step back from trading. The greatest mistake traders make is not making mistakes--we're all fallible, and we're all going to lose money at various points in time. No, the greatest mistake is to *continue* making mistakes.

When we don't step back from trading and recalibrate, we take the magic of compounding and turn it against ourselves.

Some of the best active traders I know routinely take a midday break and review their morning trading. They generate charts of their day's P/L, review markets, and basically start their day fresh whether they're up money or down. Very often they'll use that break to set a goal for the afternoon that corrects any problem they noticed in the morning.

The same idea applies to trading at the end of a day. Reviewing how markets behaved and how you performed--along the lines of the performance idea I linked yesterday--provides you with a sense of how well you're understanding markets and how well you're capitalizing on that understanding.

Professional football and basketball teams know that they need to take a time out when the game isn't going their way. It's a chance to regroup, alter strategy, correct mistakes, and just catch a breath. Similarly, we take the first step toward changing performance by interrupting our performing and entering into a reflective mode.

We set the stage for some of our best trading once we've stopped trading. It's not enough to think about markets. We also have to think about our thinking.

Source: http://traderfeed.blogspot.com/2008/02/greatest-mistake-traders-make.html


----------------


Comments:

Yeah... in regardless whether one is trading or investing, making that same mistake over and over again all the time... now that's really sickening, isn't it? And if ever I do such stuff... it will makes me feel like a darn retarded cow, making the same old silly mistakes over and over again!

Don't you agree?

Investing and Trading: Beginners and Professionals

Got an interesting comment on the following posting: Peter Lynch Lyrics: Stop Listening to Professionals

Mr. kokanart said...

Mr Moola,I think this phenomenon of an Investing beginner being able to outperform a research analyst is very interesting!

Why is it so?

In no other profession does a beginner look down on a professional except in investing.

Is Fundamental & Technical analysis so useless?

If both techniques are NOT useless- then, are they so extremely difficult to master, that the majority of practitioners will fail to do their job properly - leading Lynch to urge us to "stop listening to professionals" ( completely ?).

Alternatively, is it possible that the investment experts fail because they are lazy or sloppy rather than because they lack a good grasp of their techniques?

Where specifically does the fault lie?Another point is : Are the professionals so bad?

What is the success/failure rate?

--------------------------------------

I think this phenomenon of an Investing beginner being able to outperform a research analyst is very interesting! Why is it so?

Comments:

In my opinion, which could be flawed...

For me, a research analyst writes research report, while the investor invests. That''s all.

If you would induldge in me for a moment or two.

Let's look at the eResearh thingee offered by Bursa Malaysia. I did wrote a posting on it a couple of years ago. See posting, Research Reports Good For Stocks??

I have always challenged the monetary issue. Each company had to pay 30,000 to have their company covered by analysts! (Not sure if the fee structure is still the same! Please check!)

Here are my opinion again back then.

Charging rm30,000 simply is too much. It's insane. Think about it.

From the owner's perspective. Would you pay so much money for coverage?
From the analyst's perspective
.
Would you not tend to be a bit generous on your viewpoints?
From the investor perspective
.
With so much money involved, would the investor get an un-biased report?


And in this instance, with the monetary issue, could the research analysis perform better than the beginner Investor?

This is a complex question to answer. On one hand, yes, the beginner could screw up badly by making some rather poor stock selection.

However, if you ask me, if the beginner does the homework and make some simple sound reasoning, I do agree that it's possible that the investor could perform much much better since the investor has no obligations and they should be able to make a much better investment since their own reasoning should be pretty much unbiased.

But unfortunately as in real life, they are but no guarantees.

Sometimes, investors are rather biased in their own judgement, where their eyes tend to only see what they want to see. And many a times, investors tend to be in denial mode and refuse to see the short comings in their own stock selections.

==>> In no other profession does a beginner look down on a professional except in investing.

Comments:

It's not really the same. For me, the investor invest while the analyst writes analyst reports.

==>> Is Fundamental & Technical analysis so useless? If both techniques are NOT useless- then, are they so extremely difficult to master, that the majority of practitioners will fail to do their job properly - leading Lynch to urge us to "stop listening to professionals" ( completely ?).

Comments:

That's a massive statement to make.

Frankly, no I do not think either analysis is useless.

And from my experience, I have noted that many a times it's not the analaysis that is at fault. Most of the time I do note that the user's own judgement and interpretation of the situation is at fault.

And do understand that the series of Peter Lynch Lyrcis focuses on Peter's ideology on the markets. We all will have our own certain investing styles, trading techniques. And as long as we do understand why our methods work and as long as we do master what we do best, then why change?


==> Alternatively, is it possible that the investment experts fail because they are lazy or sloppy rather than because they lack a good grasp of their techniques?
Where specifically does the fault lie?
Another point is : Are the professionals so bad?What is the success/failure rate?



Comments:

I shall leave these questions open for all. If anyone have any differing viewpoints, I do invite you all to come forth and share your views!

Cheers

Peter Lynch Lyrics: Fixation on Stock Prices is useless

The following notes was taken from a forum posting. If not mistaken the original writings were posted at Wallstraits.com

Lynch Lyrics
Fixation on Stock Prices is useless

"To my mind, the stock price is the least useful information you can track, and it's the most widely tracked. I subscribe to the crusty notion that sooner or later earnings make or break an investment in equities. What the stock price does today, tomorrow, or next week is only a distraction."

---------------------

Other articles

My Favourite Peter Lynch Articles
Peter Lynch Lyrics: Don't invest if you don't understand the story
Peter Lynch Lyrics: Earnings, Earnings, Earnings!
Peter Lynch Lyrics: Beware the Whisper Stock
Peter Lynch Lyrics: Foolish Acquisitions
Peter Lynch Lyrcis: Investing Art & Science
Peter Lynch Lyrics: Liking the product or service is only step #1
Peter Lynch Lyrics: Missing The Obvious
Peter Lynch Lyrics: Lynch on Warren Buffett
Peter Lynch Lyrics: Penultimate Preparedness
Peter Lynch Lyrics: Contrarian Investing
Peter Lynch Lyrics: Predicting The Market
Peter Lynch Lyrics: Looking in the mirror before calling the broker
Peter Lynch Lyrics: Investing In Houses And Stocks
Peter Lynch Lyrics: Risks and Rewards in Stock Market Investing
Peter Lynch Lyrics: Trying Not To Look Bad
Peter Lynch Lyrics: Theory vs Practice

Peter Lynch Lyrics: Investing Art & Science

Tuesday, August 26, 2008

The Palm Oil Bull Market Is Not Dead

The bull market in the palm oil is NOT dead!

So said Godrej International Ltd director Dorab Mistry.

  • “The market is oversold and I would say we’re in transition. I may be mistaken but I’m convinced the bull run is not yet over. We still have a couple of years more to go,” said Godrej International Ltd director Dorab Mistry.

    Changing weather patterns could also affect yields of soyabean in the US and grains in India.

    “The US Department of Agriculture had over-estimated August rainfall in the US and there is still a question mark on the soya-bean yield,” he said.

    If the production of soyabean falls, its prices could rise. This in turn, could also boost the palm oil price as both are a near perfect substitutes. Both are used to make cooking oil, margarine, detergent and cosmetics.

    “These development are giving support to palm oil prices,” he told a hall full of more than 500 participants at the International Palm Oil Trade Fair and Seminar 2008 held in Kuala Lumpur yesterday.

    In a separate session, the Palm Oil Refiners Association of Malaysia (Poram) told reporters that defaults of palm oil shipments to India and China are not massive. At most, it is only around 80,000 tonnes.

    The trade body said recent news reports of exaggerated defaults has cause unnecessary panic and further price plunge in the palm oil futures market.

    “Certainly, there are some defaults. I’ve checked with all our members and we find that it is not to the extent of 800,000 or one million tonnes ... that is impossible,” said Poram acting chairman Yong Chin Fatt.

    Defaults occur when buyers do not want to honour a contract when prices fall too much too fast and vice versa for sellers.

    In today’s context, Yong said Malaysia's palm oil trading with India or China is already quite established and developed.

    “We sometimes wonder whether the exaggeration is done intentionally (by people who have vested interests) to cause distress in the market and push down the price further,” he said


source of article: here

Do note that this is an as-it-is-article. If you agree or disagree with what the article is saying , especially the point where Poram acting chairman Yong Chin Fatt suggested that the defaults in palm oil shipments is exaggerated and that there were probably some shenanigans aimed at pushing the prices lower, please do leave your opinion and reasoning on why you think so.

Peter Lynch Lyrics: Stop Listening to Professionals

The following notes was taken from a forum posting. If not mistaken the original writings were posted at Wallstraits.com

Lynch Lyrics
Stop Listening to Professionals

"Rule number one, in my book, is: Stop listening to professionals! Twenty years in this business convinces me that any normal person using the customary three percent of the brain can pick stocks just as well, if not better, than the average Wall Street expert. I know you don't expect the plastic surgeon to advise you to do your own facelift, nor the plumber to tell you to install your own hot-water tank, nor the hairdresser to recommend that you trim your own bangs, but this isn't surgery or plumbing or hairdressing. This is investing, where the smart money isn't so smart, and the dumb money isn't really as dumb as it thinks. Dumb money is only dumb when it listens to the smart money."

"In fact, the amateur investor has numerous build-in advantages that, if exploited, should result in his or her outperforming the experts, and also the market in general. Moreover, when you pick your own stocks, you ought to outperform the experts. Otherwise, why bother?"

---------------------

Other articles

My Favourite Peter Lynch Articles
Peter Lynch Lyrics: Don't invest if you don't understand the story
Peter Lynch Lyrics: Earnings, Earnings, Earnings!
Peter Lynch Lyrics: Beware the Whisper Stock
Peter Lynch Lyrics: Foolish Acquisitions
Peter Lynch Lyrcis: Investing Art & Science
Peter Lynch Lyrics: Liking the product or service is only step #1
Peter Lynch Lyrics: Missing The Obvious
Peter Lynch Lyrics: Lynch on Warren Buffett
Peter Lynch Lyrics: Penultimate Preparedness
Peter Lynch Lyrics: Contrarian Investing
Peter Lynch Lyrics: Predicting The Market
Peter Lynch Lyrics: Looking in the mirror before calling the broker
Peter Lynch Lyrics: Investing In Houses And Stocks
Peter Lynch Lyrics: Risks and Rewards in Stock Market Investing
Peter Lynch Lyrics: Trying Not To Look Bad
Peter Lynch Lyrics: Theory vs Practice

Monday, August 25, 2008

Success Stories: Peter Lim: Man Who Got Rich From Palm Oil

Here's an incredible success story featured on Forbes.

  • Stockbroker Peter Lim knows that most investment tips are suspect--unless they come from a man whose last name is Kuok.

    In 1991 stockbroker Peter Lim invested $10 million in a palm oil startup. At the time he didn't know much about the commodity. "If you gave me a coconut and a palm oil nut, I wouldn't have been able to differentiate between the two," he recalls.

    But he knew a lot about the guy who was starting the company. Kuok Khoon Hong used to be a stockbroking client and had since become his friend. "From the moment I first spoke to him, I thought: 'This man is really very clever. I'd better follow him because he can make a lot of money for me,'" Lim says.

    Kuok is also the nephew of Malaysian businessman Robert Kuok, who by then was already one of Asia's most highly regarded billionaires, nicknamed Sugar King for a series of coups in the commodities markets in the 1960s. Before striking out on his own, the younger Kuok had worked for his uncle.

    Thanks to his bet on Kuok, Lim, 55, is a billionaire, worth $1.1 billion and ranked No. 7 among Singapore's 40 Richest. Plus he is still an investor in one of Singapore's hottest stocks: the tiny palm oil outfit has become $18 billion (market cap) Wilmar International, one of Asia's largest agribusinesses. It has been on fire lately thanks to rising palm oil prices and its high-profile merger with Robert Kuok's palm plantation, edible oils and grain groups. The stock has more than tripled since its debut on the Singapore exchange in August 2006.

    Lim isn't the only one to get rich off Wilmar. The younger Kuok (Wilmar's CEO) is worth $1.3 billion, ranked 5 in Singapore's top 40. His cofounder, Indonesian Martua Sitorus, is worth $1.9 billion. Kuok's uncle added $2.4 billion to his net worth in the past year, thanks largely to Wilmar. But Lim is the luckiest. "Throughout [its] initial stage I never knew what was happening. Everyday I would ask Mr. Kuok what was happening," recalls Lim, "and he would say, 'Don't worry.'"

    Now he's happy--and living the high life. He has "many cars," including Ferraris, Porsches and Lamborghinis, which he parks in the basement of an 11-story condominium block he owns not far from Orchard Road. He lives there with his second wife--an actress--his mother and two teenage children. Other luxuries include a yacht and private jet. Lim believes that his fortune is due to destiny. "It's not possible for someone to go make a billion dollars--it's when things just fall into place," he says. "So I think it's fate."

    The son of a fishmonger, Lim has come a long way from the small flat he shared with his parents, seven siblings and an uncle. His hard childhood motivated him. He went to the top schools in Singapore and studied accounting and finance at the University of Western Australia in Perth, where he held several part-time jobs as a waiter and taxi driver to pay for his tuition.

    After graduating, Lim worked briefly as an accountant before starting out as a stockbroker. He eventually became known as the Remisier (Singapore term for stockbroker) King, servicing wealthy Indonesians and Singaporeans in the late 1980s and early 1990s. But it was Kuok who returned the service and by 1996 Lim stopped handling other people's money to become a full-time investor and to take care of personal matters. (He was going through a divorce that dragged on until 2001.)

    Today he has 20 people, including former bankers and a nuclear physicist, tracking his investments and giving him daily stock updates. While his nearly 5% stake in Wilmar is his most valuable, worth almost $900 million, he also has stakes in fashion retailer FJ Benjamin, investment firm Rowsley Ltd. and brewery restaurant Brewerkz.

    It will be difficult to match his Wilmar success. He's hunting for new investments, hoping to take advantage of the current downturn. He likes health care, mining and renewable energy, but what he really wants is another Kuok. "At the end of the day the key component is the person," he says. "You may target the right company, but if you've chosen the wrong person, you'll get a headache."

Source: http://www.forbes.com/execpicks/global/2008/0901/051.html

Peter Lynch Lyrics: Houndstooth & Henrietta

The following notes was taken from a forum posting. If not mistaken the original writings were posted at Wallstraits.com

Lynch Lyrics
Houndstooth & Henrietta

"Consider my friend Harry Houndstooth--whose name I've changed to protect the unfortunate. Actually, there's a little bit of Houndstooth in all of us. This Designated Investor (each family seems to have one) has just spent the morning reading The Wall Street Journal, plus a $250-a-year stock market newsletter to which he subscribes. He's looking for another exciting stock play, something with limited risk but big potential on the upside. In both the Journal and his newsletter there's a favorable mention of Winchester Disk Drives, a headstrong little firm with a dandy future."

"Houndstooth doesn't know a disk drive from a clay pigeon, but he calls his broker and learns that Merrill Lynch has put Winchester on its "aggressive buy" list. All this can't be pure coincidence, thinks Houndstooth. He is soon convinced that putting $3,000 of his hard-earned money into Winchester is a very clever idea. After all, he's done the research!"

"Houndstooth's wife, Henrietta--also known as the Person Who Doesn't Understand the Serious Business of Money (these roles could be reversed, but usually aren't)--has just returned from the shopping mall where she's discovered a wonderful new women's apparel store called The Limited. The place is mobbed with customers. She can't wait to tell her husband about the friendly salespeople and the terrific bargains."

"While you've been out squandering money, I've been home figuring out how to make it. Winchester Disk Drives is the answer. As near to a sure thing as you could get, say's Houndstooth. Meanwhile, unbeknownst to Houndstooth, the stock price of The Limited, the store that impressed his wife, Henrietta, has been moving steadily higher, from less than 50 cents a share in 1979 to $9 in 1983--already a 20-bagger, eventually to reach $53, over a 100-bagger."

"But our Designated Investor, who had plenty of time to buy The Limited even after he sold out of Winchester Disk Drive at a loss, continued to ignore his wife's tip. By then there were 400 stores nationwide, most crowded, but Houndstooth was too busy to notice. He was following what Boone Pickens was doing with Mesa Petroleum. Sometime in late 1987, Houndstooth finally discovers The Limited on his brokerage firm's buy list, and in a popular finance magazine feature. It has become the darling of the analysts, a respectable buy."

"Funny thing, Houndstooth tells Henrietta, that store you like, The Limited, turns out to be a pretty good investment, now near it's high at $50 per share. Maybe we'll invest a few thousand from our retirement funds. Henrietta says, are you sure, The Limited is overpriced today, no longer unique and I don't even shop there anymore... What's that got to do with anything, scolds Houndstooth, I'm talking about investing here, not shopping!"


----------------------

Other articles

My Favourite Peter Lynch Articles
Peter Lynch Lyrics: Don't invest if you don't understand the story
Peter Lynch Lyrics: Earnings, Earnings, Earnings!
Peter Lynch Lyrics: Beware the Whisper Stock
Peter Lynch Lyrics: Foolish Acquisitions
Peter Lynch Lyrcis: Investing Art & Science
Peter Lynch Lyrics: Liking the product or service is only step #1
Peter Lynch Lyrics: Missing The Obvious
Peter Lynch Lyrics: Lynch on Warren Buffett
Peter Lynch Lyrics: Penultimate Preparedness
Peter Lynch Lyrics: Contrarian Investing
Peter Lynch Lyrics: Predicting The Market
Peter Lynch Lyrics: Looking in the mirror before calling the broker
Peter Lynch Lyrics: Investing In Houses And Stocks
Peter Lynch Lyrics: Risks and Rewards in Stock Market Investing
Peter Lynch Lyrics: Trying Not To Look Bad
Peter Lynch Lyrics: Theory vs Practice